Chapter 7 Bankruptcy

What is Chapter 7 bankruptcy?

A Chapter 7 bankruptcy case is one in which the bankruptcy petition is filed under Chapter 7 of the Bankruptcy Code. Under Chapter 7, a Trustee is appointed to sell or liquidate any of the debtor’s “non-exempt” assets or property in order to raise cash to make payments to creditors. An “exempt” asset is property of the debtor that the law specifically allows the debtor to keep. A Chapter 7 case is sometimes referred to as a “straight bankruptcy” or a “liquidation case.”

Chapter 7 bankruptcies have been the most common form of individual bankruptcy in recent years. The vast majority of Chapter 7 cases are “no-asset cases” in which the Trustee determines that there are no non-exempt assets that must be liquidated to pay creditors.

A Chapter 7 debtor who cooperates with the Trustee and complies with all of the provisions of the Bankruptcy Code receives a discharge. A discharge is a Bankruptcy Court order that releases the individual from the legal obligation to pay debts. Certain debts, such as child support and some taxes, are not covered by the discharge and are known as “non-dischargeable debts.”

If you are in default on a loan that is secured by collateral, such as a home mortgage, the creditor can foreclose on the loan and sell the collateral even after you receive a discharge unless you specifically agree to remain legally liable for that loan under the original or modified payment terms. This is known as a “reaffirmation agreement.”

How much does Chapter 7 bankruptcy cost?

The fee paid to the United States Bankruptcy Court for filing a Chapter 7 bankruptcy case is presently $306, but is subject to change, so be sure to ask your attorney what the current filing fees are. If you are represented by an attorney you will have to pay an additional fee for legal services. The fees charged by attorneys are not uniform and vary from place to place and from attorney to attorney.